UK’s Boohoo to stop supplying US customers locally

4:55 am Wednesday, September 11th, 2024

By James Davey

LONDON (Reuters) -Online fashion retailer Boohoo said on Wednesday it would stop supplying U.S. customers from a site in Pennsylvania and return to fulfilling orders from Britain, in a strategy reversal it said would lead to an unquantified writedown.

Boohoo shares were down 2% in early trade, extending 2024 losses to 32%, after the British company said it would stop using the distribution centre by Nov. 11, just over a year after it started operations there. It said it would sublet its space at the centre, which is run by a third party.

CEO John Lyttle had previously described the site as a “complete gamechanger” as it would slash delivery times to shoppers in the U.S., Boohoo’s largest overseas market.

However, the company said on Wednesday it would return to fulfilling all U.S. orders from its automated centre in Sheffield, northern England, enabling it to cut costs over the medium term and broaden its product offering to U.S. shoppers.

“To us, the short life of the U.S. warehouse … is concerning, highlighting a naivety of the American market, along with a waste of time and resources,” Shore Capital analysts said.

Boohoo said the move would result in a write-down on its balance sheet against the investments and costs associated with the U.S. operation, as well as certain one-off exceptional cash costs. Further details will be given at its half-year results.

Analysts at Peel Hunt estimated a 34 million pounds ($44.5 million) capital expenditure write-off.

Boohoo said it “remains excited” about the opportunity in the U.S. market and had been developing wider routes-to-market strategies, the first of which was the recent launch of its Nasty Gal brand in Nordstrom stores.

Boohoo said it was in advanced talks with major U.S. brands over new routes to market for other brands within the group.

The company, like UK peer ASOS, was a winner during the pandemic, which drove a boom in online shopping. It has struggled since, hurt by supply chain problems, higher product returns, competition from rivals such as Shein and subdued consumer demand.

($1 = 0.7643 pounds)

(Reporting by James Davey; Editing by Sarah Young and Mark Potter)